Standard Of Excellence: Communication From Small Tax Practices

Over the past year or so,clients of small tax practices may have noticed that the standard of communications with them has been less than excellent and not on the same level to which they have become accustomed.

Accounting practices and,in particular,tax practitioners have been subjected to extreme pressure over the past ten months.There could be several reasons for that situation.

The tax amnesty created in excess of six months of additional work. In normal years, tax returns were issued in January each year.Salaried taxpayers were granted until 31 October to submit their returns.Provisional tax payers,members of close corporations/private companies and beneficiaries of trusts were granted ex tensions until 28 February of the following year. This year, tax returns for individuals were issued on 15 August.Practitioners were not notified that hard copies of corporate returns would not be issued. All individuals were granted until 31 October to file their returns, other than by eFiling.

If eFiling was elected as the submission route the extension was until 31 January.This was later extended to 29 February, with the understanding that if 75% of the practices’ returns were submitted by that date, their remaining clients would be given until 14 March to submit.

eFiling itself posed a number of problems. By affixing their digital signature to those returns practitioners were deemed to have signed a sworn statement that full and honest disclosure had been made by the taxpayer. That created the risk of the practitioner being held liable for omissions and errors on the part of their clients. That was an unacceptable risk. Therefore, there was a need to obtain a signed mandate from each of their clients, which relieved the practitioner of culpability for their clients’ acts. That was a most time-consuming exercise. For many, the drafting of a suitable document was only finalised in late October - thus forcing the use of eFiling in order to save clients from late lodgment penalties.

Obtaining those mandates and the registration for eFiling took the best part of November and a good part of December. SARS had given practitioners until 31 December to achieve that registration in order to avoid penalties for their clients.That was subsequently extended to 31 January 2008. In the meantime, the Christmas shutdown made even that deadline near impossible to achieve, as practitioners were unable to contact a large number of clients until after they returned to work in late January

SARS’s training staff was stretched to the limit and, despite frequent requests, our firm received only one on-site visit in mid-February, and that was to solve problems inherent in the SARS’s eFiling systems. Some of those problems have yet to be resolved.

Mandatory fields in the new tax return made it necessary to obtain additional information to that normally required, such as bank account details, additional details relating to travel and medical claims and, for certain taxpayers, a statement of their assets and liabilities.Unless the details were inserted on the tax forms the system would not allow the return to be printed or submitted.

Daily frustrations were experienced with the website itself either being offline or certain parts of the programme being inaccessible. January saw the introduction of power shedding and that resulted in a 31% loss of productive time. Valuable hardware was damaged and that caused further lost time.

In some areas of KwaZulu-Natal, ADSL and other telephone lines were out of order for two weeks during January.As early as October - through the media of stakeholder meetings with SARS officials, both at a local and national level - tax practitioners pointed out that the eFiling system was not operating correctly and that inadequate time and resources had been allocated to educating call centre consultants, the practitioners and taxpayers.

Either directly or via the media of various professional institutes, practitioners have brought those factors to the attention of the office of the Commissioner in an attempt to illustrate that the deadlines set are impossible to achieve and to motivate additional ex tensions.To date, there has been no response to those representations.

Small tax practices account for the majority of tax returns lodged in the country.Thus they are highly instrumental in creating improved compliance and collections.Yet SARS officials whilst referring to practitioners as colleagues, continue to ignore the representations of the very people who are helping them achieve the collection goals of which they are so proud.

What SARS has to say about tax season 2008

What is new for employers?The process of employers deducting and paying tax on behalf of employees most notably, the annual PAYE reconciliation process – is the cornerstone of the personal income tax process.That process has for a long time presented difficulties for both employers and SARS, because the reconciliation rarely works out first time round.By fixing the PAYE reconciliation process this year we are able to both enhance the administration of that core element of the income tax system as well as address the challenges of accuracy of third party information encountered during last year’s filing season – which will allow us to pre-populate returns for employees.

A simplified PAYE reconciliation process

We have simplified the IRP501 reconciliation form to give you the ability to perform your own reconciliation before you send it to SARS.This new form (now called the EMP501) has been available for download or from the nearest SARS branch offices from 1 July 2008. The EMP501 allows you to calculate any difference between the total value of the tax certificates you issued, your total annual declared liability (as per your monthly EMP201s) and your total payments to SARS – which simply results in a credit amount to be refunded or debit amount to be settled with SARS. Then you are reconciled! You simply submit this EMP501 with copies of all your tax certificates to SARS. You can submit that via eFiling or on disk as you have always done – or manually via a branch.

Custom-built software to help you with your reconciliation

SARS has developed custom-built software that allows you to complete the entire reconciliation process easily and electronically.This SARS software will be compatible with all major payroll systems and has been available for download or from any SARS branch office from 1 July 2008.SARS has also simplified the manual process,including new IRP5 booklets, which you will also be able to download or collect from a SARS branch.

Filing season for employers

For the first time SARS will have a filing season for employers, during which employers need to complete the PAYE reconciliation process.This 60-day period will run from 1 July to 29 August 2008.

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

MINIMUM REQUIREMENTS TO REGISTER

The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.